Lenovo Passes HP to Take PC Market Lead

SAN FRANCISCO — China's Lenovo Group Ltd. steamed into the No. 1 position in the global PC market in the second quarter, supplanting longtime leader Hewlett-Packard Co., according to market research firm International Data Corp. (IDC).

IDC, of Framingham, Mass., reported that total second-quarter PC shipments amounted to 75.6 million, down 11 percent from the second quarter of 2012. The shipment total was in line with IDC's forecast for the quarter.

In a statement summarizing the latest edition of its "Worldwide Quarterly PC Tracker," IDC said the bleak overall shipment numbers "reflect a market that is still struggling with the transition to touch-based systems running Windows 8 as well as justifying ultrabook prices in the face of economic pressures and competition from tablets and other devices."

IDC added that a number of PC vendors seemed to stress inventory reduction in the second quarter, which the firm said could point to plans to launch newer models in the second half of the year.

"With second quarter growth so close to forecast, we are still looking for some improvement in growth during the second half of the year," said Jay Chou, senior analyst for IDC Worldwide PC Tracker, in the statement.

In catapulting to the top of the PC vendor rankings, Lenovo lengthened a streak of impressive gains following channel expansion and solid product development. While Lenovo continued to make gains outside of Asia, headwinds in China caused the firm's PC shipments to decline by more than 10 percent in the Asia/Pacific region (excluding Japan), IDC said. China represents more than 50 percent of Lenovo's PC shipments.

Despite HP's fall from the top spot, both HP and fellow US PC vendor Dell Inc. saw growth improve over recent quarters in the second quarter, potentially a sign of stronger performance in coming quarters. Lenovo also grew faster than the market (as well as faster than HP and Dell) although Lenovo's shipments actually contracted by 1.4 percent, according to IDC.

Chou said economic growth has slowed in Europe and China, but that the outlook for the US economy has brightened. But he believes weakness in emerging markets poses a threat to PC sales:

"While efforts by the PC ecosystem to bring down price points and embrace touch computing should make PCs more attractive, a lot still needs to be done in launching attractive products and addressing competition from devices like tablets."

So, Lenovo has come full circle to become the largest PC vendor in the second quarter. Can the company maintain this lead? Given the slowdown in China and the evidence that HP has some new systems in the pipeline, can HP get back on top?

In China, Lenovo is definitely one of the most respected companies among high-tech firms, with its investment in R&D and solid management. While Lenovo also has big ambition for mobile handsets, I think they have a good staying power in the PC market.

I wonder if IBM would truly agree that it was a bad move. Lenovo has done very well with the business, but even so we know the margins are razor thin. We know that PC sales are on a downward trend that likely is not going to be reversed. IBM got out, and I don't know that the company has any regrets about that.

I too feel that IBM has better plans for investment and generating revenue. I also feel that the real story here is about Dell; positioning itself well for success if/when the market segment expands. Delays in getting their ownership and management plans sorted out won't help their efforts any but the numbers look good.

>> Can the company maintain this lead? Given the slowdown in China and the evidence that HP has some new systems in the pipeline, can HP get back on top?

HP does not need to get back on top. They should focus less on number shipped to margin obtained. It is like airline business. You can fill 5 seats at the economy but one business class can make all the difference. Sure, Wall Street will like that the other carried 5 people while you have one passenger. But in your books, you look better. HP may be unable to catch Levono in volume, but they can still lbe more profitable in that sector.

A recent piece about the company in one of the leading global magazines shows that they still believe that PC has a place in the future. This is a company that is efficiently managed and can generate innovations just as their Western peers.

IBM made the best decision as they have focussed on more lucrative business segment. I do not see the reason why they need to regret. The data analytics, Smart Cities, Walton etc are future markets that could be bigger than PCs.

If I were IBM, I wouldn't regret getting out. They got out in the first place because they couldn't make money, and the fundamentals that made them bail haven't changed.

PCs are commodities, with commodity pricing and razor thin margins, where the lowest cost producer wins. IBM has never been the lowest cost producer in any market. And the PC market is largely retail, and IBM has always been a B2B supplier, and never really understood retail. (Their attempt years back to have their own retail stores was a notable failure.)

Lenovo understands retail and can be cost competitive, so it's not a real surprise they reached the number one position.